JPMorgan backs off Beyond Meat, but charts could point to next big break higher

JPMorgan has lost its appetite for Beyond Meat.

The firm downgraded its stock to underweight on Friday, with analysts still believing in its long-term potential but arguing that its valuation has exceeded what they deem rational. Shares have rallied nearly 100% this year and surged almost 500% since its IPO in May 2019.

Craig Johnson, chief market technician at Piper Sandler, still sits in the bull camp on the stock.

"I'm not sure that I would quite push back from the table quite yet on this particular name because to me I look at the chart here, we've made these kind of bigger bases. And we've done that a couple times here with the stock and as we get up toward this $148 level, it looks like to us that this is a spot where the stock could ultimately break out to another leg higher," Johnson told CNBC's "Trading Nation" on Friday.

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Johnson says its trend suggests an upside objective up around $202. Beyond Meat closed Friday at $149.04 and a move to $202 implies nearly a 36% rally from current levels.

"I'd still rather be a buyer of the stock, and I think in environments like this, too, trying to sell stocks from a valuation perspective when interest rates are this low, I think is a very difficult argument to make especially in momentum-type stocks," said Johnson.

Beyond Meat may have benefited during the pandemic lockdowns, says Steve Chiavarone, portfolio manager at Federated Hermes.

"You've seen packaged food companies like Beyond Meat and others do really well during this pandemic as part of the overall stay-at-home trade. I don't think it hurt that people were stuck during the summer grilling season which certainly helps their product," Chiavarone said during the same "Trading Nation" segment.

As the economy reopens, though, Chiavarone predicts Beyond Meat may fall out of favor.

"I think you are likely to see a shift away from some of the home-based packaged foods company, and more towards the restaurants and, look, we really saw that in this [recent] retail sales number. You saw grocery store sales were actually down 1.6% in August, restaurants were up 4.7%. We think that's a trend that will accelerate," he said.

Like JPMorgan, Chiavarone does see a longer-term path forward for Beyond with consumers shifting toward plant-based diets.

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